It had to apply for resource consent because the dairying operation could result in the discharge of nitrogen or phosphorus into the water.

Hearing commissioners have decided to only grant partial consent. The decision means that while Ngai Tahu can farm the land it must comply with stringent conditions, potentially limiting the scale of its operation.

"Despite the mitigation measures proposed by NTFE, we have reached the conclusion that granting consent to the highly developed farming proposal (which is NTFE's preference) will have unavoidable and unacceptable adverse effects on the environment," the commissioners said in their written decision.

Those effects centred on nutrient losses from Balmoral and the consequent impact of those nutrient losses on the quality of surface water, particularly within the Hurunui River.

Fish & Game adviser Scott Pearson said NTFE's operations would be "significantly smaller" because of the limits placed on it, including a maximum annual nitrogen leaching amount of 57.2 tonnes.

"The bottom line is we would have seen up to 23,000 cows on this property on stony porous soils and the magnitude of this activity has fortunately been recognised by the hearing commissioners," he said.

"Effectively they have been heavily scaled back in terms of what they can use the land for."

Pearson said it was a "win" for the environment, particularly for water quality, but he was still going through the decision.

He expected NTFE would appeal.

Forest & Bird lawyer Peter Anderson said it was a mixed outcome as there were some wins for the environment, but he believed it could have gone further. NTFE's original proposal, if approved, would have had serious effects on water quality.

The hearing was one of the first considered under the new Canterbury water plans introduced by Environment Canterbury (ECan) commissioners.

The Hurunui and Waiau River Regional Plan became operational in December. It set a nitrogen limit in the Hurunui catchment which allows for more development but only if the phosphorous levels remain as they are.